Tradex Weekly Insight: Jobless Claims Number

TRADEX GLOBAL INTERNAL COMMENTARY

First time jobless claims fell by 26k to a low of 350k (the lowest number since March 2008). The biggest factor was autos, yes autos!  The auto companies are keeping more plants open than normal for this time of year. Who said the rust belt can’t make a big comeback? Most economists’ estimates were for 372k, but they are in the Hamptons or the South of France and don’t see cars rolling off the assembly line in Ohio. This number is very volatile and we do not pay that much attention to it (neither did the market at the time of this writing, equities were under attack). Prices of imported goods decreased in June as well, the 2.7% decrease was the biggest drop since December 2008. The lack of inflation, stubbornly high unemployment and slowing growth will probably force the Fed to QE3 and maybe QE4! At some point, banks will not write mortgages under a certain level, so I’m not convinced that the QE’s will continue to have a major effect going forward. I have been having this reoccurring nightmare that the only way out of the 30 year credit party is with some large defaults (I hope it is only a dream). We are staying well hedged for tail events and our smaller number of managers are holding up well. Keep very nimble. – Michael Beattie

EXTERNAL RESEARCH COMMENTARY

Fewer Americans than forecast filed first-time claims for unemployment insurance payments last week, reflecting the volatility of applications during the annual auto-plant retooling period. Applications for jobless benefits decreased by 26,000 in the week ended July 7 to 350,000, the fewest since March 2008, Labor Department figures showed today. Economists forecast 372,000 claims, according to the median estimate in a Bloomberg News survey. Last week’s distortion is likely to unwind slowly over coming weeks, a Labor Department spokesman said as the data was released to the press. Automakers including Chrysler Group LLC, Ford Motor Co. and Nissan Motor Co. are keeping more plants than normal open during this time of year to fulfill demand and replenish inventories. For that reason, it may take time to determine if the labor market is making any progress. “You can never take claims at face value because of the July shutdowns,” said Jonathan Basile, an economist at Credit Suisse in New York, who projected the number of applications would drop to 355,000. “We are in a period of uncertainty. This makes for a situation where businesses will hold off on taking risks regarding investment and payrolls.” Prices of imported goods decreased more than forecast in June as declining energy costs curbed inflation, another Labor Department report showed. The 2.7 percent plunge in the import- price index was the biggest since December 2008 and followed a 1.2 percent drop in May. Prices excluding fuel fell 0.3 percent, the most in almost two years.

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